Thu | Aug 17, 2017

Daniel Thwaites | The coming fiscal cliff

Published:Sunday | April 9, 2017 | 4:00 AM

Yes, I saw the letter from that fella 'Media Watcher' on Friday saying he almost fell off his chair because I wrote about funeral bling and didn't criticise the administration. What can I say? I'll try not to make that mistake in the future, but I just don't think the funeral extravagance and the interminable tributes are Government's fault. There are politicians who suffer under that cultural regime along with everyone else.

I could have, I suppose, connected the overwhelming number of funerals nowadays with the escalating murder rate, but I'm still giving Bobby a chance. Plus, mi fraid a obeah. I don't believe in it, of course. But mi fraida it same way.

On the other hand, I haven't been able to talk about current affairs to keep The Sunday Gleaner happy without also being highly critical of the administration. Still I want to comfort Media Watcher, who singled out myself, Garfield Higgins and Dennis Brooks.

Rest assured: "I just read a great column, so I'm going to change the way I vote" are words that were uttered by no one, not even a retard, EVER. It is money and value, and the expectation of it, that is by far the largest determinant of our politics. The rest is entertainment and parlour games. That is why the 1.5 promise was so significant. C'mon, you know the deal.

Now, when challenged, I usually want to double down. But I'm committed for at least today to avoid being too critical of the administration, or, for that matter, of any past JLP administration. I want everyone to be happy.

 

THE CHALLENGE

 

But it's a challenge. For example, just this week, The Gleaner pointed out, in an editorial titled 'A deep deficit of trust', that Government's raid of TEF money isn't going down well with the tourism industry. Then there's the mix-up-and-blender plan with CHASE Fund and the Jamaica Civil Aviation Authority dollars. Then, it's fair to say that Holness' 180-degree switcheroo on the NHT is causing a few ripples. But that's not the work of any humble commentator. There's ample video of he and Audley in evangelical denunciation of the previous administration's withdrawals.

I don't want to break my promise to be nice, but remember that in 2012, Brother Audley left the debt-to-GDP ratio at 145%, the current account deficit at 13.4% of GDP, the fiscal deficit at 7% of GDP, and unemployment at 16%. And he was playing hide-and-seek with Dr Gene Leon while Jamaica was locked off from the international markets and foreign direct investment had fallen to a paltry US250m.

I'm taking the soft approach here and only focusing on economics, which is why I'm not mentioning anything about Dudus and the largest slaughter of citizens by the Government since the Morant Bay Rebellion. Not a word.

The Jamaican economy was only brought from the brink, and the country's respectability restored, by tremendous sacrifice. It got to the point where, for the first time since 2009 or so, there was some fiscal space, meaning that once again the Government had real choices to make instead of mere hustling to get the books in shape.

But there was electoral business to take care of, and in keeping with so much of our post-Independence history, politics trumped economics.

I have an advertisement from 2016 right in front of me as I write. I quote:

"What would you do with up to $18,000 more PER MONTH?... Vote for less taxes ... ."

I have another ad right here that breaks down how much the 1.5 was supposed to cost. It says $12.5 billion. That was to be realised by $9.5 billion from "reallocation of revenue from existing gas tax"; $1.5b from "removal of threshold for those earning $5m; $4b from "improved collection on arrears"; $1.2b from "additional GCT from New Spending"; $2.5b from "natural increase in PAYE".

You would think by. looking at it that this was actually thought through, right? Wrong!! Because you then recall that at first, the public was told that it would cost $0, then $4b, then $9b, then $12b, then $16b, then $20b.

Of course, when story came to proverbial bump, the cost was $32 billion, just like they were told by anyone who knew what they were talking about.

 

'CON MAN BIZNIZ'

 

But that's who is running the country: the same guys who did and advertised that maths. If I weren't abiding by the promise to avoid disruptiveness, I would say, "Dis was con man bizness."

Now to the present. The administration has, not out of national exigency, but out of a desire to fulfil a stupid electoral gimmick, imposed billions in regressive taxation on the populace. There are retired seniors talking about drinking arsenic rather than suffer the humiliating devaluation into stark poverty.

It is now evident that the administration will be pulling back from the property taxes, but that only means that the revenue will have to be squeezed out of some other source, most likely the Supplemental Consolidated Fund, formerly known as the NHT.

Worst of all, we're looking at another fiscal hole the very size and shape of Audley, one of my favourite politicians, but who should be in charge of the entertainment sector.

The Bank of Jamaica just dropped the 30-day CD rate to 4.5%, which is obviously artificial (remember 2009 and Shaw and Governor Latibeaudiere?), given that inflation is projected at 4-6%.This while the US Treasury Department is set to increase interest rates. The obvious result is that there will be an even more frantic flight to USD and further devaluation of JMD.

On top of that, the IMF agreement stipulates that Jamaica's foreign reserves must increase from $2.5b to $4b by 2020-2021. By September, the reserves will have to be earned, not borrowed. Currently, 40% of the reserve is borrowed. More pressure on JMD. Remember that every 1% devaluation adds about $14b to the debt stock, so the social sacrifice to bring that to heel is in danger of being wasted.

Devaluation lowers the standard of living of the populace. This is the prosperity?

The 1.5 promise has an annual cost of about $32 billion, and pensions have an annual cost, now increased, of about $36 billion. They will raid the Supplemental Consolidated Fund again. But how long can this recklessness continue? If you study the administration, it becomes clear there isn't a plan, but ketchy-shubby policy improvisation.

- Daniel Thwaites is an attorney-at-law. Email feedback to columns@gleanerjm.com.